----- Original Message -----
From: "Peter R." <[EMAIL PROTECTED]>
To: "WISPA General List" <[email protected]>
Sent: Friday, December 15, 2006 8:34 AM
Subject: Re: [WISPA] salary
Check with your CPA on that.
The IRS likes to see salary and other activities that represent that your
"company" really is a company and not a tax shelter so that you avoid the
sole proprietor tax schedule.
(It's called piercing the veil -- if you don't have minutes and annual
shareholder meetings and run it like a business, you lose the corporate
shield for tax purposes AND for liability as in civil litigation).
I think you are on the mark here... according to what I picked up through my
Business Planning coursework, the IRS has fairly consistently applied a
reasonableness test to the salary of a CEO who is also a majority
shareholder. But reasonable is a fairly broad term. Zero would not be
reasonable in any case, but $10,000 or more might meet the reasonableness
standard for companies with limited revenues. On the other hand, if your
company is turning $1MM in sales, you better be paying your full time CEO
substantially more than $10,000 because the IRS will see right through that
ploy. In addition, if you try to pay the CEO through an incentive program
(dividends or stock options) in lieu of salary, the IRS will treat the
capital-gains as real income and will tax the CEO at the higher personal
rate. You have to provide a balance of salary and other non-salary
incentives in order to get the maximum tax advantage.
- Larry
--
WISPA Wireless List: [email protected]
Subscribe/Unsubscribe:
http://lists.wispa.org/mailman/listinfo/wireless
Archives: http://lists.wispa.org/pipermail/wireless/
